KUCHING (Sept 7): The viability of green assets should be considered in a similar lens with conventional assets by financial institutions, said United Overseas Bank (Malaysia) executive director and chief executive officer Ng Wei Wei at the Sustainability & Renewable Energy Forum (SAREF) 3.0.
Just because an asset is green does not mean it does not have credit risks or poor performance risk, she said during a panel session titled “Looking Beyond the Hype: Is ESG Financing Really Viable?”
“I think what is important is the same credit underwriting due diligence standard has got to be applied, whether one is looking at green assets or conventional assets,” said Ng when responding to a question about the possibility of greenwashing in environmental, social and governance (ESG) financing and whether renewable projects are commercially viable.
For projects that require huge amounts of investments, having the government’s support or commitment from an anchor could make a difference.
“Having a credible off taker is an important one, as it definitely enhances the credit warranty of the project we’re looking at,” she said.
Some projects that are high risk and capital intensive would need more than commercial funding, Ng added. “We really do need a blended financing approach, where the public and private sector come together to utilise and deploy development capital to fund high-impact projects.”
Principal Asset Management Bhd chief investment officer for Malaysia and the Asean region Patrick Chang echoed Ng’s views.
When considering a project, banks pay attention to the construction and operational risks that come with it. Having supportive government policy is a good indicator that could increase banks’ confidence in the project, said Chang.
He brought up the Sarawak government’s support for renewable energy projects as an example. But ultimately, Chang said banks and investors have to do their homework and understand what they’re investing in.
“And at the end of the day, I think the sponsorship role of the state government, as well as the federal government itself [is important], and policymaking from the Securities Commission [Malaysia] and [other regulators] are all embedded in the ecosystem to help support viable investments,” he said.